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Lesotho CAFI high level overview

 CAFI (Competitiveness and Financial Inclusion Project) launched with focus on Women and Youth inclusion

By ‘Muso Nkhasi

MASERU – Minister of Trade Industry, Business Development and Tourism launched a new project called Competitive And Financial Inclusion (CAFI) on the 3rd April 2023 at Avani Lesotho.

The project will invest more into incubating youth and women into horticulture and support small medium micro businesses in Lesotho. There are already successful fruit projects in the Leribe district at Mahobong and Likhetlane, which impressed madam Franscior from World Bank with their production. 

CAFI works in partnership with the Lesotho National Farmers Union (LENAFU) and some entities in the private sector to unite horticulture farmers in Leribe to alleviate poverty and increase employment in Lesotho.

LENAFU expressed its best wishes for the take-off of CAFI and believes that the project will ensure sustainable fruit supply in the country and render growth and success while opening doors for exportation.

At this launch, the National University of Lesotho and Ministry of Trade Industry, Business Development and Tourism signed a memorandum of understanding of the use of the Mahobong facility.

Minister of Trade Industry, Business Development and Tourism, Hon. Mokhethi Shelile disclosed that the CAFI project is financed by the World Bank however coordinated by the Ministry of Trade Industry, Business Development and Tourism.

In his speech, he outlined that the aim of the project is to increase access to business support services and financial products targeted at young medium small micro businesses and entrepreneurs especially for women and youth.

He stipulated that CAFI mainly focuses on building the local private sector and the ministry consider private sector competitive diversification project to be a successful story.

“Regarding construction permits, the project assisted Maseru City Council to streamline and automate their business processes for official issuance of construction permits. And helped RSL and Ministry of Trade to make exporting and importing easier by enhancing the automotive system for customs data to be established,” he explained.

He discussed that CAFI project will support the expansion of the projects in Leribe as to facilitate the establishment of fully pledged fruit industry in Lesotho in collaboration with its key partners; the Ministry of Agriculture, Food Security and Nutrition, the India Brasil South Africa fund for poverty and hunger alleviation, LENAFU, National University of Lesotho, Stellenbosch University and other strategic stakeholders.

The Minister of Finance and Development Planning, Dr. Retšelilisitsoe Matlanyane closed the gathering with the remarks indicating her passionate about this project as it has the potential to make a difference in Lesotho. She advised entrepreneurs to diversify their businesses and look out for productive sectors for their business sustainability.

Dr. Matlanyane encouraged farmers to insure their businesses. She pleaded to animal insurance as there is already livestock insurance to consider reasonable pricing that farmers can afford.

“We cannot continue to insure our lives alone, we need to cover our businesses as well,” she indicated.

She urged Basotho to step out of their comfort zones and unite in teams so they can understand business better.

KNOW MORE ABOUT CAFI

PS Trade & Industry, Business Development and Tourism – Mr. Thabo Moleko  – As he opened the launch, Mr. Moleko explained that the project is designed to strengthen private sector so that it (private sector) plays a meaningful role in the economy. The project is targeted at enabling access to financial products especially women and youth. The project financed by World Bank and was effected in 2022 and is to end in 2028. CAFI is funded through a loan of $45Million, with a supporting grant of $7.5Million totaling $52, 5 Million. There is a further grant of $950,000 (Nine Hundred and Fifty Thousand US Dollars) received specifically for the horticulture initiative, from the IBSA (India, Brazil, South Africa) Fund. 

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Key facts about CAFI as outlined by the Project Manager Mr Chaba Mokuku with three priority areas mainly Business Environment, Entrepreneurship & MSME Development, and Export Value Chains in Textile and Garments

This project was conceptualized during the era of Covid 19 after job losses especially in the textile industry, and after many MSMEs closed due to liquidity problems. CAFI is indeed a beacon of hope for unemployed women and youth, who are the most vulnerable. The project is aligned with the National Strategic Development Plan (NSDP) which has been extended, with the main focus on digital government, digital infrastructure, digital population and digital business.

CAFI – MSMEs and individuals to use both movable and intangible assets as collateral – as credit information bureau comes to full operation

Business Environment – CAFI is a successor of the previously known project that closed last year (2022) called private sector competitiveness and economic diversification project. It supported implementation of government to business digital services like OBFC (One Stop Business Facilitation Centre), Construction system in MCC (Maseru City Council) and Land Administration system in LAA (Land Administration Authority), and trade facilitation systems in RSL (Revenue Services Lesotho). As all systems are operating independently currently, CAFI is to first enhance the systems and also improve interoperability such that there is secure exchange of data between the systems, thereby reducing the costs and time in doing business and also reducing bureaucracy being experienced by the private sector.

  • The project is to support access to finance (biggest constraint) for startups and MSMEs. It’ll work with financial institutions to help develop financial products that respond to MSMEs’ needs, and with introduction of value chain financing. It will also be supporting review and improvement of Partial Credit Guarantee Scheme such that it responds to the needs of MSMEs.
  • Credit infrastructure systems that were implemented are going to be strengthened. Credit information bureau and collateral registry (which is already operational) is to be FULLY operational for MSMEs and individuals to use both movable and intangible assets as collateral. This will also help and broaden the scope such that corporate data is included.
  • To improve the business environment, there is going to be strengthening of resilience of MSMEs in the country. Resilience fund for MSMEs and informal sector which was obviously identified as a huge gap during Covid 19 is to address the matter. Registry of all businesses including informal sector is needed to ensure all businesses are formalized in line with new business licensing and registration law
  • On resilience also, government is exploring sovereign insurance in case of disasters where World Bank is assisting with the analysis

CAFI – 500 small businesses to be incubated up to year 2028 – as women and youth are given priority

Entrepreneurship and MSME development – diagnostics made highlighted a gap in entrepreneurial skills. The Ecosystem is fragmented hence the intended impact is minimal.

  • Establishing an Entrepreneurship hub and seed financing facility is to bring all ecosystem players together, where there will be Enterprise Support Organisations (ESOs) capacitated to be in position to incubate enterprises across sectors. Expectation is that most of the enterprises will be YOUTH AND WOMEN. Digital entrepreneurship is expected to be dominant, where the target is on innovative businesses.
  • The target is to incubate 500 business enterprises where 50 of those are to go through acceleration.
  • CAFI is looking to establish a venture capital fund to help ensure investment in those businesses that show traction to be supported to become corporates. This is for young people to grow their businesses to have global footprint as an engine to grow entrepreneurship in the country!
  • There was a matching grant programme that was known as LEAP (Lesotho Enterprise Assistance Programme) which was impactful (up to 500 businesses assisted), where it provided subsidy to procure services that made businesses more competitive, to expand and to link with international markets. The programme is to continue but with additional components

CAFI – Lesotho to have a vibrant horticulture sector as 18 farms are commercialized in the next 6 years

Export sector value chains: in NSDP and the project addresses horticulture/agriculture and textile and garment value chain

  • Many people are familiar with fruit farms in Leribe (3 pilot commercial farms successful). CAFI focus is on scaling farming such that a new industry is created beyond the 3 farms to at least 18 farms in 5-6 years.
  • The project has partnered with the National University of Lesotho (NUL) through their facility in Mabohong, which is to be used for all horticulture crops as an incubation hub.
  • The IBSA Fund (India, Brazil, and South Africa) has contributed $950,000 fund towards the facility on horticulture, and the fund is being administered by UNDP (United Nations Development Programme) Lesotho.
  • NUL is also going to be an active participant to provide and develop training programme together with University of Stellenbosch, which has more than 100 years’ experience in horticulture, all thanks to South African High Commission. Lesotho is going to have a vibrant horticulture sector in the country

CAFI – Basotho to become owners of textile and garment factories, not just workers

              TEXTILES and garment value chain

Basotho are not participating as owners but as workers in the sector. There is need to change the status quo. Existing factories in Maseru and Maputsoe just cut, make and trim. Preproduction and postproduction are both outside the country. The idea is to revitalize the sector and ensure Basotho participate through the entire value chain of textile and garments industry. ILO (International Labour Organisation) and ITC (International Trade Centre) are to partner with LNDC (Lesotho National Development Corporation), to promote investment in the sector.

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